tv [untitled] August 23, 2012 11:00pm-11:30pm EDT
good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and we are on vacation and you see we've been broadcasting since october so that means we're a little overdue for a break but in that time and in just the last few months we've interviewed so many amazing guests from jim grant to mark father to jim rickards even joining me as a co-host and we've covered so many topics that are relevant on any given day whether it's the bad or the eurozone crisis so we put together some of our very best and most popular episodes from the last few months for your viewing pleasure and the time while we're off and you can look forward to all the new shows starting september fourth so mark your calendar and don't forget interviews can all be found
in their entirety on our you tube channel you tube dot com slash capital account but for now let's get to today's capital account. federal reserve chairman the central planner in chief ben bernanke he trotted to the hill today to give another one of his economic outlook speeches as traders of course listen carefully for any news that might give them an edge on their daily speculations hoping to make a quick buck a quick buck it seems is all that americans can hope to make these days with interest rates suppressed at near zero for almost four years now forcing more and more hardworking people to speculate on riskier assets if they would like any sort
of return on their money at all now for those who are less inclined to spin the roulette wheel there is always the comfort of your mattress which guarantees a return of at least some of your money whatever is not confiscated through what mr bernanke isso euphemistically calls quantitative easing we call it counterfeiting more confrontational folks may refer to it as outright theft some but officials though most notably fed gov janet yellen says there may be more ahead they've been hinting that the central bank may ease yellin in a recent speech to the boston economic club advocated for an extended period of highly accommodative monetary policy these are of course more euphemisms as part of the central bankers efforts to revive the economy believing the economic future of the country rests on their atlee and shoulders look at ben bernanke there but
doesn't really and what if you don't trust policymaking academics with track records as bad as the feds to run the economy anyway for example listen to vernon kay today talking about the bank stress tests the tests also showed that even to extremely adverse hypothetical economic scenario most of those firms would remain able to provide credit to u.s. households and businesses. really based on what the assumptions for an adverse an area that the fed came up with with the wisdom out of their own academic papers combined with what banks are theoretically supposed to do exactly so what if you just want to work save invest and live without scanning frantically through policy statements press releases and federal reserve minutes every time you go to open your wallet well our next guest has some solutions of his own that maybe will be
a little more concise than those fed documents he's mike moloney founder of gold silver dot com and author of guide to investing and gold and silver it's part of the rich dad poor dad series and just the person to talk about all of this so first thanks so much for being on the show thank you lauren how are you doing i'm doing well it's nice to see it looks like a beautiful day in the leg break day to talk about the fed i guess there's some sunshine where you are maybe less if bernanke eases but that is what everybody is looking at it whether or not there is going to be q e three and this is really been this speculation or the question since at least q.e. two ended which was well over a year ago that was in two thousand and eleven so we did see operation twist my question to you aside from the obvious which is that q.e. has not worked and has produced a lot of unintended consequences in your view is there maybe any other reason why bernanke has not been able to initiate q e three yet. well if you did it too soon
on the heels of q.e. two i think you would have seen gold shoot for the moon and you would see oil back up above one forty in the u.s. economy grinding to a halt because just simply from the anticipation of inflation. they have to you know right now we've got this great pullback in gold which is to me is just another buying opportunity. silver you know it still hasn't even reached its nine hundred eighty high of fifty dollars and here we are in two thousand and twelve it with these this these huge stimulus packages i think q e three is an inevitability it's just a matter of time ben bernanke made all of his intentions very clear even before he became fed gov in some of his speeches in papers he's basically an inflationists he's alan greenspan had one solution to every problem print currency ben bernanke
he is of the same school yeah so we can have more to come that we can expect and your view in my view and a lot of people's views so let's talk about inflation because that's something that that you just brought up and bernie of course talked about it today is that inflation is dead he said he's not worried about deflation right now i want to bring up your predictions for what would happen during the years after two thousand and eight that you wrote about in your book back then you said in the end i think we're in for a while roller coaster ride with a few whipsaws thrown in first the threat of deflation followed by a helicopter drop followed by big inflation followed by real deflation and then followed by hyperinflation so might moloney how is this played out and where are we now. well i think you know that was written before the financial crisis in two thousand and eight and. the financial crisis of zero eight
i think was that threat of deflation and all of these quantitative easing are the overreaction the helicopter drops that i was predicting when i wrote that and we've had we've seen a reflation of the financial sector of the stock market of oil but it hasn't done anything to stimulate the true economy it isn't trickling in you know all of this currency that ben bernanke he whipped up is basically sitting on banks' balance sheets and it's not. you know when you look at money supply statistics it's not part of the circulating medium right now this this currency that he whipped up all it did was inflate the financial sector and and sort of just put lipstick on this pig so then where are we in regard to deflation. well i think we're seeing some true deflation of the currency supply right now you know the number of
dollars that exist is a reflection of total credit when they create credit there could be they're creating dollars and the total credit supply peaked back in two thousand and seven at about fifty three trillion we're up now to fifty four trillion but most of that that increase there's a two trillion dollar increase in that was part of all these quantitative easing some bailouts. and that like i said is sitting on the banks' balance sheets if you look at base money base money is a measurement of currency in circulation plus the cash that's sitting in the commercial banks checking accounts at the federal reserve and before the crisis of zero eight ninety seven percent of base money was out there in circulation in the public was using it it was it was actually created that's what creates the economy
he did these bailouts and you know it took two hundred years to go from zero dollars in existence to eight hundred twenty five billion and then in just the past couple of years it's gone from a twenty five to about two point eight trillion and let's go ahead and bring it down and actually have not really i don't know if they created. so what i'm going to get going i just wanted to break as a society for our viewers if we could back up to the previous chart that we had in the can charm their base money so that our viewers can see what you're talking about ok so continuing you were talking about the expansion of base money and its impact what is that yeah well the huge increase that you see on that chart is the bailouts and the quantitative easing. and really it's stimulated the financial sector but it hasn't gone it hasn't trickled down into the general economy where it circulates one of the. the fed used to publish something called
three they no longer publish it everybody uses two now instead of m three but these are measurements of the highly circulating portion of the currency supply where the public is actually getting the benefit of the currency this doesn't just measure cash in circulation but it also measures checking account balances and some smaller size time deposits and what you see is that it's shrinking a little since two thousand and eight but then if you did ducks basement base money as a component of em too if you take out that base money component it shows that the bailouts that bernanke he is doing aren't doing anything to trickle down into the general economy the quantitative easing they have no result we're seeing a contraction. to when you take out the base money there's a twenty five percent contraction in this aggregate of the currency supply this is
never happened except for the onset of the great depression this is is this is huge alarming news. this is true monetary deflation that we're seeing here ben bernanke he is fighting it but he can't control where all the dollar. he creates where they go and they generally go into some like you said unintended consequences they're going into an unintended place and they'll create a bubble here or a bubble there but they're not going to have the effect that he desires and the only thing that will work is just to allow the free markets to work and to stop having the audacity and arrogance to try and to think that he knows more than the free market the free market is the sum total of all the transactions going on in the economy he thinks he knows more as and he thinks he can decide what the quantity of currency should be and what the price of currency should be the
interest rates that's a lot of arrogance and it just won't work it is a lot of arrogance and i when we get back from a break we'll take a quick one i want to talk to you about when the public or how the public is going to feel this contraction they are talking about in this deflation so we will have much more with mike maloney author and founder of gold silver dot com after the break also still ahead what some heavy hitters are ignoring the bear market right from gold recent downturn we'll tell you who are the so-called gold bugs in these change but first your closing market numbers.
welcome back we're talking about the fed's failed attempts to stimulate the economy despite calls for it that we heard on the hill today with ben bernanke he there so before we go back to our guest i want to bring up a chart that shows what he was talking about before the break ok this shows and to which includes bass money so bass money reflects the fed's attempts to broaden the money supply to get that money to the real economy but what you can see is that as the fed has contributed to that increase in base money what you see is a contraction in m two so let's bring michael back in and ask him when and how the public is going to feel this if they already are so again he's founder of gold silver dot com and author of guide to investing in gold and silver which is part of the rich dad poor dad series so mike maloney before the break you were talking about this contraction that hasn't happened since you said the great depression so when and how does the public feel this and is there a lag in between the charts and when it does affect them. you know there
is you know. ben bernanke he really does and he's gone down a path where he doesn't really have a choice is going to have to continue all of this loose monetary policy policy and stimulus and what have what you're seeing happen here that contraction in m two means that people's what the general public is feeling their wages are not really increasing their portion of the economy isn't rising and doing great what's happening is everything that is being created is going into the financial sector so we can have a deflation in a slowing of the economy a deflation in the number of dollars available for the public to use true true inflation or deflation is either the expansion or contraction of the currency supply of the available currency for the public to use the that which creates the
economy. if they if he continues with quantitative easing and ramping up the base money and the portion that the financial sector uses for all of their bets basically what you're going to see is the price of commodities going up well wages are stagnant or falling. and so you'll be seeing deflation in the public sector of the currency supply inflation in the financial sector and where they place their bets the commodities and so on and it's a recipe for disaster i believe well along those lines as you're talking about the fed's attempt to inflate but they get the same time you could still see deflation and the money that the public has let's bring out their attempts to keep trying ok janet yellen who is the vice chair of the board of governors at the fed just in a speech last night said that as she discussed this evening prolonging weakness in
the housing sector remains one of the several serious headwinds they think the u.s. economy. and she says given these headwinds i believe that a highly accommodative monetary policy will be needed for quite some time to help the economy and so my question about these headwinds that housing are is this a headwind simply because it's about all the debt in housing that's dragging down the economy and houses are just the conduit for this borrowing binge. yeah it is it is this debt bubble dragging down the economy will but what amazes me is that the people around that are running the economy don't know anything about economics this head when you get a look at what created the wind ok the stock market crash back in two thousand and . ten created a very accommodative policy and basically pumped the goose the money supply and that caused the real estate bubble the real estate bubble is trying to deflate and
to seek equilibrium where you have the right balance of the number of homes that are available on the market and the demand for those homes it's that simple it's a supply demand equilibrium that it's trying to seek and they're not allowing the free markets to work and to clear out all of this excess inventory and so on they're going to try and boost the economy somehow and it always has unintended consequences and you know people have just been burned on stocks twice in the last decade and they just got burned on real estate there's another asset class that all of this currency can flow into commodities and precious metals and i think that since people just got burned on the other asset classes that this is where the next great bubble is destined to be and i think ben bernanke is just you know the pawn that is fulfilling the destiny that we're about to see gold and silver rising to
cover the currency supply well and also to talking about precious matter of metals and gold and silver we have a slump right now in gold prices and we have people saying oh this is a gold bear market and we see other things that are considered safe havens people running to them we see treasuries at record low yields and we see people running to german bund so what gives you the confidence looking at restaurant that gold is is the best insurance against the liability of the theater and these. well you know the average person does not understand that a treasury is an iou and so all of these bonds they are ious. and. they rely on the performance of a counterparty and what you're seeing is counter parties like for instance that the government of greece they're not as reliable as we once thought they were and so people are running around from different forms of one form of debt to another form
of debt buying and selling different ious and eventually they run to the ultimate safe haven and that's precious metals but you know. yeah. and that whole thing is just laughable yes and that's the future that you think is going to play out i appreciate you being on the show to spell out how and why and thanks for being on that was mike maloney is author and founder of gold silver dot com. all right let's wrap up with loose change we ended on gold let's start on gold because the recent slab as i said has some in the mainstream media talking about
a gold bear market threat but guess who's reportedly been buying. but we are at the mean collection point could be the three months window the markets who continue more but do with or not be able to be on. he of course is talking about what the markets required are required in order for the euro system to remain stable not collapse people to not lose faith entirely so george soros meanwhile has been buying up golden s.e.c. filing shows that he's not the only one hedge fund manager john paulson is also the biggest has the biggest stake as gold trust which is the largest exchange traded product backed by bullion now this is all according to bloomberg so these heavy hitters are gold bugs you know off memory right now remember correctly source was
buying the gold e.t.f. paulson was either in the. buying physical one of these two guys or both had been unloading of one point or the fact that they're getting back on is interesting i think also the fact that this coincides with source of speech means that maybe he's going short credit he's going along gold is going short currencies so you know these guys are these guys could potentially these guys can these guys work on the margin so if source is right if this is true as yours is betting on gold and he's right then we're in for a real storm of sorts so the money system where a storm in quotes was going to say something storm a big storm. and i don't know the guy because people believe in time guys so. what we have soros and paulson flight a flowing away on a gold balloon i mean they're pretty much golden and to be true we cannot leave you out there quickly. ok speaking of bleeping out or maybe i don't know breaking take a look at what ended up on live t.v.
if you haven't seen it already today ok this is a member of the neo nazi golden dawn party which now has seats in parliament in greece this is a spokes person attacking a strawman it female member of the communist party in greece on live t.v. take a look. but this you know they get beat up on it because i don't. know whether that was. ok. if you look at what. you believe that footage it almost looks like mockery yeah but it's not this guy's this guy's a you know he's a loser he's a he's a criminal all right well first of all he was a kid. now in this government goes a psychopath your entries parliament is like by the way this is this apparently this is my job we found this on the internet spank me. that's that's kind of using for greek i'm not going to say what it is but in the case you know he has some
other people it is a little bit use the word and if you can see the woman that the member of parliament for the the communist party stood and took all through those so i suggest you go hit the gym at the gym a big guy you know get some since you you couldn't even go. after three good smacks and now she's tough and this has lady goes a wimp just like the rest of his gang but you know they talk tough but they're nazis thing is and we're going to move on is that obviously there's a huge stigma about the fact that this is a neo nazi group and they live up to it they live up to everything that you would imagine he's hitting a woman on live t.v. i mean that's brutal and he's the spokes person so that's a great great yes there you go that's the best one most well behaved you have to assume moving on to a new study by career builder is confirming what many other studies have realized about our jobs take a look. today we're talking about the contribution that your job may be putting to
your problems with weight yes obviously it's good news when your employees but the bad news is your job can be making you fat especially if you sit all day. so work it make you fat i guess that's one thing that you can throw to unemployed americans however according to the study forty four percent of workers that were surveyed have gained weight at their current job i don't know any personal anecdotes. that sort of should know the story was picked by shannon because she knows that i'm on a diet because again which is i started working here and it's true i've gained weight is a very stressful job i go for ice cream on a regular basis and i've already told the person i'm sort of not to let you know if i should go down the guy's cream ok well dimitri some other career opportunities you could look into. actually know these are ones that will will will compound your problems being a travel agent and attorney joe a social worker all of those groups are. gaining weight but dimitri sorry being a t.v.
producer i don't run on i don't play shows so that through i don't have it it's not possible because this is the one of the most stressful jobs on the planet ok we have to work all day long there was a come on air and i have to look good i have to look around for everybody i don't think so i want to and i want to you know where my problems ok. i'll go get you some ice cream after the show because that's all we have time for think. don't forget to come back tomorrow for more coverage. in the meantime you can follow me on twitter out lauren lyster you can haggle dimitry on his twitter account too at covering delta and give us feedback on the show at youtube dot com slash capital account thanks for watching state of our. download. cations so far choose your language stream quality and
enjoy your favorites from azzurri t.v. is not required to watch on t.v. all you need is your mobile device watch ati any time. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything you thought you knew. i'm tom harpur welcome to the big picture.